Incoterms 2010

Prof. Shah Vilas

 Incoterms® 2010
What is the International Chamber of Commerce (ICC)?

 Founded in 1919 (in Paris)

 Representatives from over 120 countries
 Represents the views of the Private Sector on the practical elements
of conducting international trade and investment.
 Very highly regarded and viewed as having legitimacy and authority in
most countries; a knowledgeable and reliable resource on int’l trade.
 Key services include Int’l Court of Arbitration, ICC Chamber of
Commerce Network.
 Works closely with the WTO and the U.N., and G20
 Has a large framework of working committees that address key
sectors and makes available rules and guidelines in areas as Finance,
IT, Transportation and more . . . .

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 Incoterms® 2010
What are Incoterms® ?

 International Commercial Terms (Incoterms)

 First formulated by the ICC in 1936
 A set of standardized guidelines that parties in different
countries (and different legal environments) use for structuring
the logistical elements of selling and buying goods.
 The emphasis is on delineating (in a sales transaction of tangible
goods) the risks and costs between the seller and the buyer via
determining a specific place and time for delivery of the goods.
 For decades, the ICC just revised Incoterms as needed (as in
early 80’s replacing C& F with CFR ) but has been on a 10 year
cycle since 1990, then 2000, and now the 2010 revision.

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 Incoterms® 2010
What are Incoterms® ?
 International Commercial Terms (Incoterms)

 With the 2010 version, the word “Incoterms” becomes a

registered trademark of the International Chamber of
Commerce in Paris.

 And for the first time these terms are now referred to as RULES

 Will be in some 36 (or more) languages

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 Incoterms® 2010
What are Incoterms® ?

 Abbreviated in a three letter format, and the abbreviations

are always in English.

 Typically quoted with a specific geographic location of

delivery, as Ex Works Seller’s Plant or can be as simple as
FOB Any Port (but usually best to be specific as you can).

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 Incoterms® 2000 vs. 2010
 EXW – Ex Works
 FCA – Free Carrier
 FAS – Free Alongside Ship
 FOB – Free On Board
 CFR – Cost and Freight
 CIF – Cost, Insurance & Freight
 CPT – Carriage Paid To
 CIP – Carriage & Insurance Paid To
 DEQ – Delivered Ex Quay
 DES – Delivered Ex Ship
 DAF – Delivered at Frontier
 DDU – Delivered Duty Unpaid
 DDP – Delivered Duty Paid
Marine Restricted
 EXW – Ex Works
 FCA – Free Carrier
 FAS – Free Alongside Ship
 FOB – Free On Board
 CFR – Cost and Freight
 CIF – Cost, Insurance & Freight
 CPT – Carriage Paid To
 CIP – Carriage & Insurance Paid
To
 DAT – Delivered At Terminal
 DAP – Delivered At Place
 DDP – Delivered Duty Paid
Omni-Modal
Group Term Definitions

F – Terms
C – Terms
D – Terms
 F-Group Terms
 Are considered to be “Shipment Contracts”
 Are considered Buyer Friendly
Seller Buyer
• Handles Export Clearance • Contracts for Main Carriage
• Handles Pre-carriage • In charge of Carrier (and
• Named Place on Seller’s Side usually forwarder) selection
• Control over Freight Costs
• Control of Documentation
 C-Group Terms
 Are considered to be “Shipment Contracts”
 Are considered Seller Friendly
Seller Buyer
• Contracts for Main Carriage • Named Place is on Buyer’s side
• In charge of carrier (and • Has risk of loss while goods are
usually forwarder) selection in transit with carrier selected
• Handles pre-carriage and paid for by seller
• Has control over freight costs • Must rely heavily on Seller for
data elements required for
• In control of documentation
ocean shipments.
• Passes risk of loss (delivers) to
Buyer prior main carriage
• Handles export clearance
 D-Group Terms
 Are considered to be “Arrival Contracts”
Seller Buyer
• Contracts for Main Carriage • Named Place on Buyer’s side
• In charge of carrier (and usually • Must rely heavily on Seller for
forwarder) selection data elements required for ocean
• Handles pre-carriage shipments such as Importer
Security Filing (known as ISF or
• Has control over freight costs
10+2)
• In control of documentation • Undertakes less risk than in “C”
• Passes risk of loss (delivers) to terms
Buyer at freight arrival point
• If inexperienced, or does not
• Handles export clearance have good relationship with
carriers, is served well by “D”
• Seller may have revenue
terms
recognition issues since
“delivery” occurs on arrival side,
meaning revenue is recognized
only upon arrival
EXW (Ex-Works)
 Any mode term
 Least work for exporters/sellers
 Popular among new exporters
 Seller makes goods available for pickup
(including agreed packaging)
 Is the packaging suitable for international
shipments?(seller’s responsibility)

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EXW (Ex-Works) Continued
 Buyer responsible for loading goods at
EXW place
 How often does this actually happen?
 If the seller is loading, who takes responsibility if damage occurs?
 What document evidences of delivery?
Buyer responsible for export and compliance
documentation
 Seller must provide company info to buyer’s forwarder
 All of this makes EXW less desirable

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EXW (Ex-Works) Seller’s obligations-
 Provide goods and commercial invoice
as per contract
 Checking quality, measuring,
weighing,counting necessary
 Export licenses, security
clearances,carriage and insurance-
assist the buyer
EXW (Ex-Works) Buyer’s Obligation
 Export, Import licenses, carriage and
insurance contracts, cost of customs
formalities,
 Cost of mandatory pre-shipment
inspections , cost of security related
documents
 FCA (Free Carrier)
 Recommended as substitute for EXW
 Can be used with any mode of transport
 Seller must deliver the goods to the carrier
provided by the buyer at a named point on
the seller’s side
 If no point is named the seller can choose a point best
suited for them - the named point can be the seller’s facility
 Seller is responsible for:
 Packaging, Loading, Pre-carriage (if any – none if at seller’s
dock), Export Clearance, and Compliance Documentation
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FCA (Free Carrier) Continued
 Seller not responsible for unloading on
buyer’s side
 Buyer responsible for everything else
after loading
 Insurance – Buyer pays
 Freight Collect – Buyer pays

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FCA (Free Carrier) Continued
 Transfer of risks-
 A- Seller up to the delivery to carrier
 B- If no carrier is specified, then till the
goods are placed at the disposal of
carrier.
CPT – CARRIAGE PAID TO
 Seller delivers the goods to Carrier or
another person nominated by Seller at
an agreed place (if any such place is
agreed between the parties) and that
Seller must contract for and pay the
costs of carriage necessary to bring the
goods to the named place of
destination;
CPT – CARRIAGE PAID TO
o May be used irrespective of the mode of transport selected;
o May be used where more than one mode of transport is
employed;
o When this term is applied, Seller fulfills its obligation to
deliver when it hands the goods over to Carrier and not
when the goods reach the place of destination;
o The parties are advised to identify precisely in the contract:
the place of delivery, where the risk passes to the Buyer,
and the named place of destination to which the Seller must
contract for carriage.
o Under CPT, Seller is obliged to clear the goods for export,
where applicable. However, Seller has no obligation to deal
with import.
CIP – CARRIAGE AND
INSURANCE PAID TO
 Seller delivers the goods to Carrier or
another person nominated by Seller at
an agreed place(if any place is agreed )
and that Seller must contract for and
pay the costs of carriage necessary to
bring the goods to the named place of
destination;
CIP – CARRIAGE AND
INSURANCE PAID TO
o May be used irrespective of the mode of transport
selected;
o May be used where more than one mode of
transport is employed;
o Seller also contracts for insurance cover against the
Buyer’s risk of loss of or damage to the goods
during carriage. Such insurance is obtained by the
Seller at the minimum level;
o When this term is applied, Seller fulfills its obligation
to deliver when it hands the goods over to Carrier
and not when the goods reach the place of
destination;
CIP – CARRIAGE AND
INSURANCE PAID TO
o The parties are advised to identify precisely
in the contract: the place of delivery,
where the risk passes to Buyer, and the
named place of destination to which Seller
must contract for the carriage;
o Under CIP, goods are cleared for export by
Seller (where applicable).
DAT – DELIVERY AT
TERMINAL
 Seller delivers when the goods, once
unloaded from the arriving means of
transport, are placed at the disposal of
the Buyer at a named terminal at the
named port or place of destination.
“Terminal” shall include any place such
as quay, warehouse, container yard or
road, rail or air cargo terminal;
DAT – DELIVERY AT
TERMINAL
o May be used irrespective of the mode of
transport selected;
o May be used where more than one mode
of transport is employed;
o Seller bears all risks involved in bringing
the goods to and unloading them at the
terminal at the named port or place of
destination;
DAT – DELIVERY AT
TERMINAL
o The parties are advised to specify as
clearly as possible the terminal and, if
possible, a specific point within the
terminal at the agreed port or place of
destination, as the risks to that point are
for the Seller’s account;
o DAT requires Seller to clear the goods for
export, where applicable. However, Seller
has no obligation to deal with import.
DAP – DELIVERY AT PLACE
 Seller delivers when the goods are
placed at the disposal of Buyer on the
arriving means of transport ready for
unloading at the named place of
destination. Seller bears all risks
involved in bringing the goods to the
named place;
DAP – DELIVERY AT PLACE
o May be used irrespective of the mode of
transport selected;
o May be used where more than one mode
of transport is employed;
o The parties are advised to specify as
clearly as possible the point within the
agreed place of destination, as the risks to
that point are for the account of the Seller.
DAP – DELIVERY AT PLACE
o DAP requires Seller to clear the goods for
export, where applicable. However, Seller
has no obligation to deal with import.
o If the parties wish Seller to clear the goods
for import, pay any import duty and carry
out any import customs formalities, the
DDP term should be used.
DDP – DELIVERED DUTY
PAID
 Seller delivers the goods when the
goods are placed at the disposal of
Buyer, cleared for import on the arriving
means of transport ready for unloading
at the named place of destination;
DDP – DELIVERED DUTY
PAID
o May be used irrespective of the mode of transport
selected;
o May be used where more than one mode of
transport is employed;
o Seller bears all costs and risks involved in bringing
the goods to the place of destination and has an
obligation to clear the goods not only for export,
but also for import, to pay any duty for both
export and import and carry out all customs
formalities;
DDP – DELIVERED DUTY
PAID
o DDP represents the maximum obligation
for the Seller;
o The parties are advised to specify as
clearly as possible the point within the
agreed place of destination, as the costs
and risks to that point are for the account
of Seller;
o The parties are advised not to use DDP if
Seller is unable to obtain import clearance.
FAS – FREE ALONGSIDE
SHIP
 Seller delivers when the goods are
placed alongside the vessel nominated
by Buyer at the named port of
shipment. The risk of loss of or damage
to the goods passes when the goods
are alongside the ship, and Buyer bears
all costs from that moment onwards;
FAS – FREE ALONGSIDE
SHIP
o FAS shall be used only for sea or inland waterway
transport;
o The parties are advised to specify as clearly as
possible the loading point at the named port of
shipment, as the costs and risks to that point are
for the account of Seller and these costs and
associated handling charges may vary according
to the practice of the port;
o FAS requires Seller to clear the goods for export,
where applicable. However, Seller has no
obligation to deal with import of the goods.
FOB – FREE ON BOARD
 Seller delivers the goods on board the vessel
nominated by Buyer at the named port of
shipment or procures the goods already so
delivered;
o The risk of loss of or damage to the goods passes
when the goods are on board the vessel, and the
buyer bears all costs from that moment onwards;
o This rules shall be used only for sea or inland
waterway transport;
FOB – FREE ON BOARD
o FOB may not be appropriate where goods
are handed over to the carrier before they
are on board the vessel, for example goods
in containers, which are typically delivered
at a terminal. In such situations, the FCA
rule should be used;
o FOB requires Seller to clear the goods for
export, where applicable. However, Seller
has no obligation to deal with import of the
goods.
CFR – COST AND FREIGHT
 Seller delivers the goods on board the
vessel or procures the goods already so
delivered. The risk of loss of or damage
to the goods passes when the goods
are on board the vessel. Seller must
contract for and pay costs and freight
necessary to bring the goods to the
named port of destination;
CFR – COST AND FREIGHT
o When CFR term is used, Seller fulfills its obligation
to deliver when it hands the goods over to Carrier
in the manner specified in the rule and not when
the goods reach the place of destination;
o While the contract must always specify a
destination port, it might not specify the shipment
port, which is where the risk passes to Buyer. If
the shipment port is of particular interest to
Buyer, the parties are well advised to identify this
port as precisely as possible in the contract;
CFR – COST AND FREIGHT
o CFR may not be appropriate where goods
are handed over to Carrier before they are
on board the vessel, for example in
containers, which are typically delivered at
a terminal. In such circumstances the CPT
term should be used;
o CFR requires Seller to clear the goods for
export, where applicable. However, Seller
has no obligation to deal with import.
CIF – COST INSURANCE
AND FREIGHT
 Seller delivers the goods on board the
vessel or procures the goods already so
delivered. The risk of loss of or damage
to the goods passes when the goods are
on board the vessel. Seller must
contract for and pay the costs and
freight necessary to bring the goods to
the named port of destination;
CIF – COST INSURANCE
AND FREIGHT
o Seller also contracts for insurance cover
against Buyer’s risk of loss of or damage to
the goods during the carriage. Such
insurance is obtained at a minimum level;
o When this term is used, Seller fulfills its
obligation to deliver when it hands the
goods over to Carrier and not when the
goods reach the place of destination;
CIF – COST INSURANCE
AND FREIGHT
o The contract does not specify shipment
port, but specifies destination port. May be
necessary to specify shipment port
additionally;
o Advised to identify point at the agreed port
of destination as the costs to that point are
for Seller’s account;
o CIF requires Seller to clear the goods for
export, where applicable. No Seller
obligation to clear for import.
Thanks